Mother's Day is this Sunday, so you should do what you do every year: Pamper the Moms of your world. Give them a little loving kindness and thanks. And, of course, don't forget to give them some stock ideas -- straight from our annual Stocks for Mom special. Oh, and these stock ideas could be good for you, too.
Have a great weekend, everybody!
In today's Motley Fool Take:
- Krispy Kreme Goes Stale
- Discussion Board of the Day: Krispy Kreme
- Pixar's Future Unfolds
- Shameless Plug: Motley Fool Stock Advisor
- Oil Hits $40
- Quote of Note
- More on Fool.com Today
Krispy Kreme Goes Stale
By Alyce Lomax (TMF Lomax)
Has it finally happened? Has the low-carb trend, which has plagued many a food company, finally hit Krispy Kreme Doughnuts
A Motley Fool Stock Advisor pick, Krispy Kreme said it now anticipates fiscal 2005 earnings to be 10% lower than its previous guidance. First-quarter earnings are now seen coming in at $0.23 per share, while fiscal 2005 earnings will be $1.04 to $1.06 per share; including charges, Krispy Kreme forecasts annual earnings of $0.93 to $0.95 per share.
There are a few things to wonder about here, not least of which are sudden changes. After all, historically, Krispy Kreme has delivered steady revenue and earnings growth despite building interest in carb cutting over the last year. Its 35% revenue growth and 45% net income growth last year are part of the reason Rick Munarriz threw it into the ensemble in his Six Stocks for Six Friends feature.
Meanwhile, investors have been worried about the demonization of carbohydrates and how it might impact Krispy Kreme. That's been discussed for some time as at least part of the reason for Krispy Kreme's lackluster stock price. Other stocks with less cultish products and appeal have suffered from low-carb eating, such as Hostess provider Interstate Bakeries
Off-premises sales -- in other words, those boxed doughnuts you see with the Krispy Kreme packaging at your local grocery store -- have also been adversely effected by the low-carb trend, the company said.
If investors really thought that this was the crux of the problem, though, they might have relaxed today. Krispy Kreme recently said it was working to develop a lower-carb, lower-fat doughnut (a move to which I played devil's advocate, wondering about undermining the almighty, decadent brand). Right now, though, if low-carb diets are indeed plaguing Krispy Kreme, I question why it didn't mention this development effort in its press release today. At the same time, the company did say it was among the initiatives it's pursuing "urgently" in its conference call (transcript courtesy of CCBN StreetEvents).
The other aspect of today's press announcement that might warrant a critical eye, is the company's announcement that it will sell Montana Mills, a bread and pastry concept that Krispy Kreme bought for $40 million only a little over a year ago. While we love companies that focus, it seems like a rather sudden development.
When Krispy Kreme previously seemed insulated against the low-carb trend, was there more going on than met the eye? While some might see Krispy Kreme as an exceptional bargain in the event that the low-carb craze ends up just another passing fad -- which, of course, would give credence to the idea that today's warning is only a temporary speed bump in the company's long-term growth rate -- would-be Krispy Kreme shareholders have a lot of food for thought before gobbling up shares.
Alyce Lomax does not own shares of any of the companies mentioned.
Would you like to defend the honor of Krispy Kreme? Do you think this is just temporary sugar shock, or will low-carb diets ruin the outlook for the stock? Take a break on the Krispy Kreme discussion board, where Fools are discussing today's news as we speak.
Pixar's Future Unfolds
By Rick Aristotle Munarriz (TMF Edible)
There are a few constants with Pixar
Of course, there are footnotes to all these. Yes, Pixar will be in prime position to at least double its profits out on its own, but one can't completely discount Disney's contribution. Yes, the company has been topping its own guidance, yet one can't ignore that it has watered down those targets recently. Yes, Pixar's first five films grossed an average of $239 million in domestic box office, but the company is -- once again -- not taking the formulaic way to success with its next release that appears headed for a PG rating.
In fact, while Pixar saw its revenues nearly triple, with profits following suit, we are still left with questions about what the studio will look like once its partnership with Disney comes to a close after next year's Cars.
During yesterday's conference call, Pixar CEO and Apple
I'm a fan of Pixar to the point of recommending it to my own mom for Mother's Day. I can't wait to see what the company is capable of on its own. That goes beyond not having to split film profits with Disney. I want to see if the same creative minds that have mesmerized movie audiences of all ages can monetize their fleet of properties better than Mickey Mouse has.
I am not concerned that The Incredibles will open later this year with a PG rating. There were folks who wondered if an animated full-length feature that took place underwater would pan out last year. Finding Nemo went on to become the most successful animated flick of all time.
You can't teach that kind of ingenuity. Perhaps that's why Pixar was singled out (at considerably lower prices, I might add) in our Motley Fool Stock Advisor newsletter. Let Pixar open a gelato stand. I'll bet you it won't be serving vanilla.
Longtime Fool contributor Rick Munarriz owns all of the Pixar releases on DVD. Yes, he owns Pixar, too -- and Disney.
Krispy Kreme was a Motley Fool Stock Advisor pick. Curious to know which other stellar stocks made the cut? Then take a free trial, risk-free for six months. Click here to check out David and Tom Gardner's hot newsletter.
By Bill Mann (TMF Otter)
For a brief time this morning, the price of June crude oil futures crossed the $40 level for the first time since the Gulf War in 1991. Ouch! Rising oil prices can't possibly be helpful for the story of a rebounding economy, can it? It must be some sort of conspiracy -- after all, this comes little more than a month after the OPEC cartel announced that it was reducing oil production by a million barrels a day. I should note that given the recent downdraft in the dollar, oil prices seem to have risen substantially here, but if you remonetize in euros, for example, the "spike" is much less severe.
The cost of raw crude feedstock is of course a component of what makes prices at the pump -- and all of the other places oil is used -- higher. But although I'd never want to be accused of carrying water for OPEC, it's not really their policies that have made oil prices skyrocket. It's demand, it's speculation, it's fear of further terrorist attacks on supply in the Middle East, it's the fact that we've put so many potential sources of domestic production off limits. All of these things have costs, and all of them get passed on to the end user.
And perhaps most importantly, it's a whole host of regulations and lack of refinery capacity in the U.S. that have caused such pain among consumers, among airlines, among shipping companies, and so on. This was the thesis I used two years ago in selecting Valero
So when you read articles about Americans' renewed love of horsepower in cars, and you see the Valero chairman commenting that this is the best environment he's ever seen for refining profits, you know that the refining bottleneck is ferocious.
It is generally a net negative for refineries for oil prices to skyrocket as it compresses margins. In this case, though, prices are high, and companies like Valero, ChevronTexaco
Basic laws of supply and demand tell me that the chance of oil prices coming down to OPEC "target levels" of $23-$28 any time soon are fantasy. It also tells me that those $40 tanks of gas I recently complained about may continue to be the norm. I'll think differently only when officials start getting serious about addressing the undercapacity for refining.
Bill Mann owns none of the companies mentioned in this article.
"Ideas are like rabbits. You get a couple and learn how to handle them, and pretty soon you have a dozen." -- John Steinbeck
In other news:
- Number One With a Bullet
- Papa John's Recipe for Disaster
- How to Invest for College
- Strayer Poaching Traditional Students
For a list of all our stories from today, see our Today's Headlines page.